It was assumed at that time that the t20 format was for youngsters only. Many older, established players opted out of playing t20's. Ponting, Dravid, Ganguly etc. Also, I believe he was far too good for something that was barely cricket.
Dhoni was chosen to captain India only because three senior players – Rahul Dravid, Sachin Tendulkar and Sourav Ganguly – all decided that they didn’t want to play at the first World T20 in 2007. “We thought it is better if the younger guys played that tournament,” said Dravid. “Twenty20 is a game for youngsters.”
I don't think India have needed him in that format. I think the only country that takes t20 internationals seriously (as defined by number of front line first choice players playing it vs using it as tool to discover new talent) is Pakistan.
Sachin was too dignified to indulge in this slogfest and I applaud him for that. Most cricketers these days put up with IT20s in order to keep getting those T20 league contracts. T20 is just a way to make easy money for cricketers, the format has no importance otherwise.